Friday, January 30, 2009

Today we celebrate Friedrich August von Hayek (1899-1992) for his defense of capitalism. Hayek is considered one of the most important economists and political philosophers of the twentieth century. He made large intellectual contribution to both the Austrian School of economic reasoning and the theory and philosophy of law.

Born in Vienna, Austria, into a family of academics and intellectuals, Hayek's influences were more than sufficient to guide him in the same direction. At the University of Vienna he earned doctorates in both law and political science. He also studied rigorously economics, philosophy, and psychology.

Of his academic work (Wikipedia):

"Hayek was one of the leading academic critics of collectivism in the 20th century. Hayek believed that all forms of collectivism (even those theoretically based on voluntary cooperation) could only be maintained by a central authority of some kind. In his popular book, The Road to Serfdom (1944) and in subsequent works, Hayek claimed that socialism required central economic planning and that such planning in turn had a risk of leading towards totalitarianism, because the central authority would have to be endowed with powers that would have an impact on social life as well, and because the knowledge required for central planning is inherently decentralized.

Building on the earlier work of [Ludwig Von] Mises and others, Hayek also argued that while, in centrally planned economies, an individual or a select group of individuals must determine the distribution of resources, these planners will never have enough information to carry out this allocation reliably...Hayek claimed, [this] can be maintained only through the price mechanism in free markets (see economic calculation problem). [Hayek made this arguement publicly in his essay] The Use of Knowledge in Society (1945)... In Hayek's view, the central role of the state should be to maintain the rule of law, with as little arbitrary intervention as possible."

Hayek's work in monetary theory and business cycle theory earned him a 1/2 stake in the 1974 Nobel Prize. His contribution in these areas seem as relevant today as they did in the era of Great Depression (see here).

Hayek's nearly life-long devotion to free-market capitalism places him, in my opinion, among the top of our Heroes of Capitalism list (along with several other Austrian economists and philosophers we've yet to discuss). For much more on F.A. Hayek and the Austrian School, see the links below. Also check the AustrianEconomists blog for recent discussion on ongoing economic concerns.